Private and Public Debt: Are Emerging Markets at Risk?

March 22, 2017

Preview Citation

Format: Chicago

Marco Bernardini, and Lorenzo Forni. Private and Public Debt: Are Emerging Markets at Risk?, (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using a dataset covering a large sample of emerging economies (EMEs), we study the relationship between debt and economic performance in bad times. While previous research has shown that private debt buildups exacerbate the duration and intensity of recessions in advanced economies (AEs), we document that this effect is very pronounced in EMEs as well. Moreover, although rapid public debt buildups are unlikely to be the primary trigger of financial crises, in EMEs they are associated with deeper and longer recessions than in AEs. Part of this difference is explained by a less supportive fiscal policy in EMEs during crises.

Subject: Banking crises, Financial crises, Fiscal policy, National accounts, Private debt, Public debt

Keywords: Accumulation matter, Banking crises, Debt accumulation, Debt buildup, Debt-recession cycle, Emerging markets, Financial crisis, Global, Government spending, Private debt, Private-public debt, Recessions, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/061
Stock No:

WPIEA2017061
ISBN:

9781475588170
ISSN:

1018-5941

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